Spare Consumers the High Costs of Bad Government Policy

Another proposal favored by Speaker Pelosi is to raise taxes on “Big Oil.” Undoubtedly, there are countless inefficient tax deductions for favored industries that riddle the tax code. These should be scraped as a part of comprehensive tax reform. Yet it’s illogical to assume that raising taxes on a company would encourage it to lower prices. Just the opposite should be expected: Taxes raise business costs and companies pass those costs on to consumers. In other words, Speaker Pelosi’s tax hike would move gas prices in exactly the wrong direction.

Of course, while the Speaker wants to punish “Big Oil” with higher taxes, she wants to use the tax codes to reward “green” energy sources. The results of previous government efforts to tip the market in favor of politically correct energy industry players should give the public pause.

Republicans and Democrats alike have embraced subsidies for corn-based ethanol fuels, and the results are now being felt across the world. World food prices have risen by 83 percent since 2005, leaving many areas with shortages and relief organizations struggling to meet a rising demand for assistance. Studies have suggested that between a third and a quarter of the rise in prices is due to biofuel production. Ironically, the environment has been another loser in the push for ethanol. As Time Magazine recently detailed in its cover story, “The Clean Energy Scam,” forests, wetlands, and grasslands—considered environmental jewels—are being destroyed in a rush to farm crops that can be turned into gasoline.

This history should give politicians some humility. Instead of attempting to micromanage the marketplace, policymakers should roll back unnecessary government intervention. Biofuels, solar, wind, and other alternative energy sources may have a big role to play in our future energy marketplace, but the government also needs to allow for more exploration for oil and the development of additional refining capacity. Instead of trying to pick winners and losers, the government should let the market work.

Speaker Pelosi’s grab bag of energy proposals would be more likely to cause gas prices to rise than to bring consumers any relief. Instead of asking the government for help, Americans frustrated with rising prices—whether it’s at the gas pump or in the grocery store—should ask politicians to first do no harm.